It could also go down as a year in which investors felt as much euphoric as paranoid; as greedy as fearful. It has also been a year where neither the contrarians nor the trend line watchers have been thoroughly successful, making it a year with mixed success or failure for all.
2010 has also been unlike any of the past three years. While 2008 was clearly the year of the bears, in 2009, the bulls trumped the bears. 2010, on the other hand, remains a 50-50 on the back of a variety of factors, positive and negative, such as continued global economic weakness, uncertainty in the Euro land with the fear of contagion spreading to larger economies, while strong economic performance by India, conducive policy environment, stable macro-economic position and the resultant stronger-than-ever FII flows enabled us to almost touch all-time highs.
2010 was also a year when investors and their financial advisors could have lost patience with each other, due to several developments over the course of the year. For instance, fast-paced changes to regulations, such as no-entry loads and caps on charges on financial products have changed the dynamics of the compensation model, causing heartburn for advisors.
The investor too bore the brunt as a result of lack of quality advice from the advisor despite paying charges /fees as a result of heightened volatility amongst asset classes. For the stock market, 2010 could well go down as the year of the stock broker. While it could be debated whether an investor made money or lost it, the broker has certainly made the most of this volatility and gained out of it as record volumes were registered, making his business model positioned to perform. Also, 2010 turned out quite a surprising year as far as asset performance is concerned. Gold continues to rally and is up another 22 per cent (in dollar terms); debt returns (long duration funds) have been 5-6 per cent, equities returns have been modest and real-estate continues to see lacklustre returns. This means that from an asset performance year 2010 stands out as the year of gold though it did not start out as one. From that perspective, it has been as unpredictable as it could get. What could be in store for 2011?
While in 2010 gold trumped all other asset classes, bonds performed miserably on the back of rising money supply and resultant inflation, and crowding out of private investment by the government. All this led to very volatile and lacklustre performance from bonds over the past 12-15 months. The recent tightening measures by the RBI (which started in early 2010) seem to be on the last legs and we should see the impact over the first half of 2011.
Bad news continues for realty
Overall, the RBI's policies may be more biased towards containing inflation. This lays the platform for lower volatility in the bond market.Any indication of softer interest rate regime towards the end of 2011 could see excellent returns from bonds.
How would equities, real-estate and commodities perform? Of all the different scenarios and complexities that asset markets display, 2011 could yet look similar to 2010 in terms of performance in individual asset classes. The volatility in equities markets could peak in the first half of 2011 on the back of mixed results and consequent churn in sectors from investors (domestic and foreign).
We could have positive returns from the broader markets, but it looks difficult whether we could witness high double-digit returns such as the ones seen during the Bull Run (2004-2007) or in 2009. Gold could witness consolidation with increase in volatility, quite unlike what we have seen so far, on the back of mixed news from the Euro land and the US. Finally, it will be continued bad news for real-estate as higher yield from relatively low risk assets puts pressure on real-estate prices and volumes. The fact that 2011 could be yet another year of consolidation, events and volatility in the asset markets (at least in the first half) means that we could see investors, intermediaries and regulators on their toes as they have been in 2010. 2011 could well go down as the year of the debt investor. As for equities, the bull run usually is succeeded by a sustained bond rally. So, 2012 could very well be that year. For the latest updates PRESS CTR + D or visit Stock Market news Today
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